Result Update: NIIT Technologies Ltd - ACCUMULATE - TP Rs.1083 - Kotak

NIIT Tech, in the past four consecutive quarters, has delivered a steady beat on revenue expectations. The company has been consistently winning large deals (> TCV USD 20mn) against Tier I vendors which is aiding strong revenue visibility.

Key Highlights

- NIIT Tech reported revenue growth of 5.4% in dollar terms v/s our estimate of 3.3%. EBITDA margins at 18% was in line with our estimates. The company has shown consistent improvement in margins in past four quarters and remains positive on further improvement in margins, going forward. PAT increased by 13.9% YoY to Rs.861mn.

- Management has guided for a strong FY19 and expects organic CC revenue growth to be in at least double digit. Also, margins are expected to expand further aided by strong deal momentum.

- NIIT Tech continues to win USD100mn + deal during the quarter with 12 month executable order rising to USD 339mn after having stagnated at USD 320mn for past few quarters. Company signed seven large deals during this fiscal (2 in 1HFY18 and 5 in 2HFY18) and is confident of signing at least 7+ large deals in FY19.

Valuation & outlook

- We have upgraded our revenue estimate for FY19/FY20E given the strong execution in FY18 with healthy commentary for FY19, and believe company is set for a turnaround from FY18 onwards. We expect USD revenues to grow at CAGR of 12.7% over FY18-20. We expect margins to improve further over FY19/20. With continued outperformance, optimistic outlook for FY19 and company entering into double digit organic growth trajectory we ascribe a higher multiple of 15x. We maintain ACCUMULATE with a target price of Rs.1082 (Rs.798 earlier).

Shares of NIIT TECHNOLOGIES LTD. was last trading in BSE at Rs.1028.35 as compared to the previous close of Rs. 1027.9. The total number of shares traded during the day was 252884 in over 5851 trades.

The stock hit an intraday high of Rs. 1085 and intraday low of 987.65. The net turnover during the day was Rs. 259568273.

Source : Equity Bulls

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